Stock Exchange.
Shortly after tanking office, President de la Madrid allowed the establishment of private brokerage houses with wide latitude to conduct financial transactions in domestic capital markets. That action laid the foundation for the first significant stock market in Mexican History, the Mexican Stock Exchange (Bolsa Mexicana de Valores – BMV). Following several years of dynamicgrowth, the BMV´s leading index fell sharply as a result of the October 1987.
United States stock market crash. The BMV, recovered slowly in 1988, then surged ahead from 1989 through 1991. By the early 1990´s, the BMV had become one of the world´s fastest growing stock exchanges. During 1991 the index of traded stocks rose 128 percent in new peso terms and 118 percent in United States dollar terms.Analysts attributed the stock market´s buoyancy to increased confidence in the economy and to expectations of lower interest rates and approval of NAFTA.
In 1992, 199 companies were listed as trading on the stock exchange. A total of 11 trillion new pesos were traded and the exchange had a total capitalization of US $139 billion and a price-to-earnings ratio of more than thirteen. The total valueof stocks traded increased by US $191 billion between 1987 and 1993. Treasury bills, bank acceptances, and commercial paper were the most common instruments traded. Although the value of Mexican- owned stocks rose by about US $134 billion between 1987 and 1993, only 0.2 percent of all Mexicans had brokerage accounts at the end of 1992.
The BMV´s market value stood at about US $200 billion at theend of 1993. Analysts attributed the rise partly to expectations of higher profits resulting from a 1 percent point reduction in the corporate tax rate, lower energy prices for industrial users, and euphoria over the passage of NAFTA. Despite a setback induced by the January 1994 Zapatista rebellion in the state of Chiapas, the BMV continued its strong growth in early 1994. Beginning in March,however the market was buffeted by a series of political shocks-including two high- profile political assassination revelations of high- level corruption in President Salinas´s entourage, and continued unrest in Chiapas- that contributed to its high volatility throughout the rest of the year.
The stock market was further buffeted by the collapse of the peso in early 1995, causing the stock index tofall to less than 1,500 points in February of that year. The main stock index gradually recovered to just under 3,000 points by the end of 1995 and had reached 3,300 by September 1996. Mexican stocks gained 24 percent in dollar terms during the first eight months of 1996.
Mexico´s stocks market had US $70 billion capitalization in September 1996, according to Morgan Stanley Capital InternationalIndices.

Exchange Rate
From December 1982 until November 1991, the Mexican peso had two rates of exchange against the United States dollar- the controlled or “official rate and the fire rate”. The controlled rate applied to in come from most merchandise exports to funds used by “Maquiladora” assembly industries for local expenditure than fixed assets, to nearly all import payments, and toprincipal and interest payments and other credit expenses. The free rate applied to most other transactions, such as tourism and profit remittances.
In November 1991, the government eliminated all exchange controls, thereby unifying the various peso exchange rates. The regime freed the peso to float within a band, the bottom of which was fixed at 3,051 pesos per dollar and the top of which wasdevalued by 0.2 pesos per day. Renewed pressure on the peso forced the authorities in October 1992 to raise the average daily depreciation to 0.4 pesos per dollar, increasing the peso´s annual rate of devaluation to less than 5 percent. The peso continued to appreciate in real terms, however because Mexico´s inflation rate exceeded that of the United States by some 8 percentage points. The government...